BEFORE THE DEPARTMENT OF TRANSPORTATION OFFICE OF THE SECRETARY WASHINGTON, D.C.

_____________________________________ ) Application of ) ) Docket DOT

- OST

- 1999

- 6240 REPUBLIC AIRLINE INC. ) Docket DOT

- OST

- 2013

- 0086 ) For an exemption from 14 CFR Part 93 )

u nder 49 U.S.C. § 41714(d) )

_____________________________________ )

JOINT MOTION OF SOUTHWEST AIRLINES AND JETBLUE AIRWAYS F OR LEAVE TO FILE AND SUR

- REPLY

Communication s with respect to this document should be addressed to:

Ron Ricks

Executive Vice President

– Chief Legal and Regulatory Officer Mark Shaw

Vice President General Counsel & Corporate Secretary SOUTHWEST AIRLINES CO. 2702 Love Field Drive Dallas, TX 75235

- 1611 James Hnat Executive Vice President JetBlue Airways Corporation 27

- 01 Queens Plaza North Long Island City, NY 11101

Robert C. Land Senior Vice President JetBlue Airways Corporation 1212 New York Ave, NW, Suite 1212 Washington, DC 20005

Robert W. Kneisley

Associate General Counsel Leslie C. Abbott

Senior Attorney SOUTHWEST AIRLINES CO. 919 18 th Street, N.W. Suite 600 Washington, DC 20006 bob.kneisley@wnco.com (202) 263

- 6284 Jonathan B. Hill J. Parker Erkmann Benjamin M. Berlin Cooley LLP 1299 Pennsylvania Ave, N.W. Washington, DC 20004 jhill@cooley.com perkmann@cooley.com bberlin@cooley.com (202) 776

- 2725

Counsel for JetBlue Airways Corporation January 24 , 201 41 BEFORE THE DEPARTMENT OF TRANSPORTATION OFFICE OF THE SECRETARY WASHINGTON, D.C.

_____________________________________ ) Application of ) ) Docket DOT

- OST

- 1999

- 6240 REPUBLIC AIRLINE INC. ) Docket DOT

- OST

- 2013

- 0086 ) For an exemption from 14 CFR Part 93 )

u nder 49 U.S.C. § 41714(d) )

_____________________________________ )

JOINT MOTION OF SOUTHWEST AIRLINES AND JETBLUE AIRWAYS FOR LEAVE TO FILE AND SUR

- REPLY

Southwest Airlines Co. (“Southwest”) and JetBlue Airways Corporation

( “ JetBlue”) move to file this sur

- reply submitted in response to the Reply of Republic

Airline Inc. (“Republic”) and its corporate affiliate s Shuttle America Corporation (“Shuttle

America”) and Chautauqua Airlines, Inc. (“Chautaqua ”) concerning the Department’s

slot slide exemption authority at Ronald Reagan Washington National Airport (“DCA”)

. Despite unequivocal legislative history that Congress created the slot slide mechanism

solely for the benefit of small slot holders to enhance competition at DCA and never

intended the provision to benefit large incumbent slot holders like Delta, 1 Repub lic

asserts that its proposal constitutes an “exceptional circumstance” justifying a departure

from nearly two decades of Department precedent limiting slot slides to carriers “holding

a limited number of slots at ” DCA. 2

The fact is that Delta could serve Madison or Omaha today using its own large

portfolio of slots, or for that matter Republic could hold out service in its own name or in

1 49 U.S.C. §41714(d).
2 Application of Midwest Express Airlines, Inc.

, DOT Docket 49741, Order 94

- 9

- 49

, at 3 (Sep. 30, 1994).2 the name of one of its corporate affiliates using these slot slides. What Republic has

failed to do, however, is provi de any justification why a large DCA incumbent like Delta

should be given the slot slides to serve either of these cities

. Making the Republic/Delta proposal even more brazen, Delta has gone full steam

ahead, by

- passing the Department, its authority and decision, loaded fares for service to

these two communities and begun selling the service without so much as a waiting the

Department ’s action on the proposal. This s ur

- reply will inform the Department of the

ad verse consequences of allowing Republic and Delta to subvert the Congressional

intent and Department policy concerning the grant of slot slides at DCA.

I. Republic and Delta Already Have A ffected the Transfer of the Slot Slides.

As shown below, Republic and Delta already have implement ed their proposed

t ransfer of three DCA slot slide exemptions to facilitate service to Madison and Omaha

exclusively under the Delta Connection brand. On Friday the 18 th of January, Delta

loaded fares for the proposed service

— fares that in Madison market are more than

1 00% great er than those in effect for the same service offered by Republic 3

— and has

begun to sell tickets, as depicted in the screenshots below:

3 Delta’s $253 fare represents an increase of approximately 22 0 % from Republic’s DCA

- MSN fares, which averaged $115.3 From a consumer’s perspective, Shuttle America is all but invisible. Delta

controls the marketing, distribution, and pricing of these flights, and the service appears

to be just two more flights in Delta’s already large portfolio. Republic’s de facto tra nsfer

of the slot slides to Delta in this manner is contrary to the intent of the governing statute

, disrespectful of the Department

, and should not be permitted.

II. Republic’s Proposal Violates the Language and Intent of Section 41714

.
Republic ’s contention that its proposal is not a prohibited “transfer” contravenes

the language and intent of the statute. 4 The statute broadly prohibits exemption

holders from making any form of transfer and gives the Department the discretion to

determine whe ther slot slide exemptions should be granted. Section 41714(j) provides:

No exemption from the requirements of subparts K and S of part 93 of title 14, Code of Federal Regulations, granted under this section or section 41716, 41717, or 41718 may be bought, sold, l eased, or otherwise transferred by the carrier to which it is granted.

49 U.S.C. § 41714(j) (emphasis added) . Moreover, the statute reserves to the

Department the discretion to determine if a slot exe mption meets the prescribed

statutory criteria for gra nting a slot slide

. 5 As applied, the Department has consistently

interpreted the statute and the Congressional intent behind it as authorizing slot slide

4 See Application of Republic Airline Inc.

, Reply of Republic Airline, et al., Docket DOT

OST

- 1999

- 6240 & 2013

- 0086, at 7

- 8 (Jan. 22, 2014) (“Reply”)

. 5 49 U.S.C. § 41714(d) (authorizing exemptions “only under circumstances determined by the Secretary to be exceptional”).4 exemptions when necessary to assist carriers holding small numbers of slots to

enhance competition at DCA. 6 Despite this framework established to make the

Department the gatekeeper for slot slide exemptions, Republic /Delta has cut the

Department out of the process altogether. T hat has had the perverse result of allowing

these limited slot slide exemptions to be used for the benefit of Delta, the second largest

slot holder at DCA. If permitted, Republic’s strategy would undermine the Department’s

own authority to ensure that these limited slot slide exemptions fulfill their original

purpose

— to al low carriers with limited slot portfolios to offer competitive, commercially

viable services.

III. The Republic Proposal Does Not Satisfy the Exceptional Circumstances Standard in Section 41714(d)

.
By transferring the commercial benefit of the slot slide exemptions to an

incumbent airline with a significant DCA slot portfolio, Republic’s proposal fails to satisfy

the Department’s very high bar for exceptional circumstances. The Department has

previou sly discussed how difficult it is to satisfy this standard in circumstances when the

carrier has a robust slot portfolio :

In determining what circumstances qualify as “exceptional,” the Department must be guided by the usual meaning of that term. “Excepti onal” means “forming an exception; rare...” In order for circumstances to be “exceptional” according to the usual meaning of the term, we must find that they are ones not generally encountered, ones clearly different from most other circumstances.

. . .

6 Order 94

- 9

- 49, at 3 (“ Specifically, it is clear that the Secretary’s authority to grant exemptions under this provision would apply only in limited circumstances to meet the specific needs of carriers holding a limited number of slots at Washington National .”); Application of Midwest Express Airlines, Inc. , DOT Docket OST

- 99

- 6240, Order 99

- 11

- 4, at 2 ( Nov. 4, 1999 ) (“There the Departme nt cited Congress’s intent that the pertinent exemption authority apply only to meet the specific needs of carriers holding a limited number of slots at Reagan National and to enhance competition.”).5 Acc ordingly, the usual meaning of “exceptional circumstances,” as informed by the legislative history, would suggest that t here is a very high bar to finding such circumstances exist where a carrier has sufficient slot holdings to be able to adjust its schedu les and operations

. 7

In that case, the Department denied American’s slot slide applications because, as a

holder of a significant slot portfolio, it had the tools to reconfigure its schedule, including

making adjustments with existing slot holdings or tr ading slots. 8 The Department

concluded: “ N othing we have found in our review indicates that American, as an

incumbent with numerous DCA slots, satisfies the very high bar required to show

exceptional circumstances.” 9

The Department must reach the same conclusion with respect to the

Republic/Delta proposal. It is indisputable both that Delta will be the beneficiary of

these slot slides exemptions and that Delta has a robust DCA slot portfolio with which it

can serve b oth Omaha and Madison. 10 Given these facts , the Department cannot

conclude that these circumstances are “exceptional”. 11 If the Department were to allow

the Republic/Delta plan to go forward, the governing statute would for all practical

purposes be gutted , as there would no longer be a prohibition on the transfer of slot

slides for the commercial benefit of any carrier, no matter how large its slot portfolio.

7 Applications of American Airlines, Inc. and American E agle Airlines, Inc.

, DOT Docket OST

- 2003

- 16349, Order 2004

- 5

- 6 , at 2 (May 4, 2004) (emphasis added) (footnotes omitted)

. 8 See id. at 5.
9 Id.
10 T he Reply asserts that Republic, Shuttle America and Chautauqua have relatively few slots available with which to fund the proposed Delta services. Reply at 6. This argument is of no moment. Th e Republic proposal will benefit Delta, so it is Delta’s ample slot portfolio that is relevant here.
11 The Reply argues that American’s recent decision to terminate DCA

- OMA service makes the exceptional services for OMA “even greater” than before (Reply at 2). In fact the opposite is true, since American’s cessation of service enables Delta to serve OMA with its own slots on a monopoly basis rather than having to off er only competitive service.CERTIFICATE OF SERVICE

I hereby certify that on January 24, 2014, a copy of the foregoing was served via

e

- mail on the following persons:

marshall.sinick@squiresanders.com (Alaska Airlines) robert.wirick@aa.com (American Airlines) francis.heil@aa.com (American Airlines) sascha.vanderbellen@delta.com (Delta Air Lines) robert.cohn@hoganlovells.com (Republic Airlines) patrick.rizzi@hoganlovells .com (Republic Airlines) dkirstein@yklaw.com (Spirit Airlines) jyoung@yklaw.com (Spirit Airlines) John.Fredericksen@suncountry.com (Sun Country Airlines) steve.morrissey@united.com (United Air Lines) howard_kass@usairways.com (US Airways) benjamin.slocum@u sairways.com (US Airways) pmurphy@lopmurphy.com (USA3000) barbara.russell@virginamerica.com (Virgin America) susan.kurland@dot.gov todd.homan@dot.gov reese.davidson@dot.gov cindy.baraban@dot.gov Kevin.schlemmer@dot.gov Dennis.DeVany@dot.gov Rob.hawks@faa.g ov brian.ctr.meehan@faa.gov info@airlineinfo.com

__________ /s/

________________ Deborah Kunkle